Herbert Donald Singer - Page 12




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                                     Discussion                                       
          A.  Activity Not Engaged In For Profit Under Section 183(c)                 
               Under section 183(a), if an activity is not engaged in for             
          profit, then no deduction attributable to that activity is                  
          allowable except to the extent provided by section 183(b).  In              
          essence, section 183(b) allows deductions to the extent of gross            
          income derived from such activity.                                          
               Section 183(c) defines an activity not engaged in for profit           
          as “any activity other than one with respect to which deductions            
          are allowable for the taxable year under section 162 or under               
          paragraph (1) or (2) of section 212.”  Deductions are allowable             
          under section 162 or under section 212(1) or (2) only if the                
          taxpayer is engaged in the activity with the “actual and honest             
          objective of making a profit.”  Ronnen v. Commissioner, 90 T.C.             
          74, 91 (1988); Fuchs v. Commissioner, 83 T.C. 79, 97-98 (1984);             
          Dreicer v. Commissioner, 78 T.C. 642, 645 (1982), affd. without             
          opinion 702 F.2d 1205 (D.C. Cir. 1983); sec. 1.183-2(a), Income             
          Tax Regs.  Although a reasonable expectation of profit is not               
          required, the taxpayer’s profit objective must be bona fide.  See           
          Hulter v. Commissioner, 91 T.C. 371, 393 (1988); Beck v.                    
          Commissioner, 85 T.C. 557, 569 (1985).                                      
               Whether the requisite profit objective exists is determined            
          by evaluating all surrounding facts and circumstances.  Keanini             
          v. Commissioner, 94 T.C. 41, 46 (1990); sec. 1.183-2(b), Income             






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